As we enter into a new year, the seers seem to be certain that the number of vehicles to be sold in 2001 is less than were sold in 2000 in the U.S. The number may be down by a million or more. Given that there continues to be global overcapacity—too many vehicle plants chasing too few customers—and given that the U.S. remains the most-appealing market, it is evident that things are going to be tough in the months ahead in terms of sales. And as the OEMs are hit, so too are all of the suppliers (arguably, they are hit harder than the OEMs as they tend not to have the luxury of things like finance arms or other businesses that can provide income that’s not directly tied to car sales).
So what does it take to prosper under these conditions? The same things that it takes to prosper under any conditions. Quality. Superb Design. If you have both of them, you win. If you have one, you're better off than if you have neither—especially since if you have neither, your reason for being will probably be called into question.
From the standpoint of Quality, it is somewhat disturbing that Ford Motor Company has gone from being the firm that was synonymous with the phrase “Quality Is Job One" to an outfit that has not only been involved in the Firestone tire recall, but which rolled out with the Escape sport utility vehicle, a vehicle that has been doing a reverse Houdini with regard to dealerships: after they escaped out of the dealerships, repetitive recalls have brought them back into dealer garages. Not ideal.
There can be numerous rationalizations for this occurring, but guess what: The Customer doesn't care. When she or he buys a vehicle, they don't expect to be receiving mail explaining to them that, ah, something is wrong. This is unacceptable for a toaster. It should be unthinkable for a vehicle—especially when there are safety-critical systems involved.
Everyone knows what Quality is. It doesn't take a master statistician to work it out. Some people say things like "Quality is a given." Given what is fairly widespread in the industry—it's not just Ford's problem—it seems as though the status quo just isn't so.
Then there is the issue of Superb Design. Arguably much of Chrysler's problem can be attributed to the fact that it has gone from being a outfit that has been putting great designs on the road to one that has become complacent. Although the new generation minivan is certainly a solid vehicle, can anyone really say that it has brought things to a new level?
So now the competition gets tough—again. Those companies that are going to come out just fine are those that understand the Quality and Superb Design requirements. They are the companies that don't obsess so much on what their direct competitors are doing as much as they think about how they can learn from other companies in other industries.
Consider Swatch. The Swiss watch industry was on its knees. Japanese watch companies had taken advantage of electronics capabilities and efficiently churned out an array of cost-effective time pieces. Pretty soon Casios and Seikos wrapped wrists everywhere. Swatch decided to change the rules. They competed on the basis of fashion. Small lots of intriguing designs. An extremely competitive price point. And the company has become extremely competitive.
I can hear the objections. I've heard it countless times in varying formulations, all of which comes down to: "But the auto industry is different." The product is complicated. It requires a huge investment. It has always been done this way.
Guess what: The Customer doesn't care. Quality and design win.